10-QPeriod: Q1 FY2017

KLA CORP Quarterly Report for Q1 Ended Sep 30, 2016

Filed October 20, 2016For Securities:KLAC

Summary

KLA Corporation (KLAC) reported strong financial performance for the quarter ended September 30, 2016, with total revenues reaching $750.7 million, a 17% increase year-over-year. This growth was primarily driven by a significant rebound in product revenues, up 22% from the prior year's comparable quarter, and a steady increase in service revenues. The company's gross margin improved to 63.0% from 57.9% in the prior year, reflecting improved product mix and revenue volume. Net income for the quarter was $178.1 million, translating to a diluted EPS of $1.13, a substantial increase from $0.66 in the prior year. This improved profitability was supported by disciplined expense management, with R&D and SG&A expenses growing at a slower pace than revenue. The company also benefited from a lower effective tax rate, partly due to the early adoption of new accounting standards for share-based payments. The company ended the quarter with a strong liquidity position, holding $2.49 billion in cash, cash equivalents, and marketable securities.

Financial Highlights

48 data points
Beta

Revenue

$750.67M

63.0% Gross Margin

Net Income

$178.10M

23.7% Net Margin

EPS (Diluted)

$0.11

Total Assets

$5.00B

Cash & Equivalents

$966.33M

Free Cash Flow

$159.89M

Financial Statements
Beta
Revenue$750.67M
Cost of Revenue$277.84M
Gross Profit$472.84M
R&D Expenses$129.23M
SG&A Expenses$94.39M
Interest Expense$30.73M
Net Income$178.10M
EPS (Basic)$0.11
EPS (Diluted)$0.11
Shares Outstanding (Basic)1.56B
Shares Outstanding (Diluted)1.57B

Key Highlights

  • 1Total revenues increased by 17% year-over-year to $750.7 million.
  • 2Product revenues saw a significant 22% year-over-year increase, driven by strong demand in Asia.
  • 3Gross margin improved to 63.0% from 57.9% in the prior year's quarter.
  • 4Net income surged to $178.1 million, up from $104.9 million in the prior year's quarter.
  • 5Diluted earnings per share (EPS) rose to $1.13 from $0.66 year-over-year.
  • 6The company ended the quarter with a robust liquidity position of $2.49 billion in cash, cash equivalents, and marketable securities.
  • 7KLA Corp. announced on October 5, 2016, the mutual termination of its merger agreement with Lam Research Corporation, with no termination fees payable.

Frequently Asked Questions

KLA Corp. is a leading supplier of process control and yield management solutions for the semiconductor and related nanoelectronics industries. Its revenue is generated from the sale of systems (products), spare parts, and related services (maintenance contracts, billable time and material service calls).

KLA Corp. experienced strong year-over-year revenue growth, with total revenues increasing by 17% to $750.7 million. Product revenues, a key driver, increased by 22%, while service revenues saw a more modest 4% increase.

The mutual termination of the merger agreement with Lam Research, announced on October 5, 2016, removed a significant strategic uncertainty for KLA Corp. Since no termination fees were payable, it allowed the company to focus on its standalone operations and strategy moving forward without the distraction and potential integration challenges of a merger.

KLA Corp. maintained disciplined expense management. While R&D expenses increased by 8% year-over-year due to increased headcount and consulting, and SG&A expenses increased by 3%, these increases were lower than the revenue growth. This expense control, coupled with revenue growth and improved gross margins, led to a substantial increase in net income and diluted EPS.